Absa Bank to shut down its money market fund in July 2021

SOUTH AFRICA – Banking group Absa Bank has announced it will shut down its investment vehicle Absa Money Market Fund (AMMF) in July 2021, ending its 25-year-old money market unit trust because, it says, many investors mistakenly believe it guarantees returns.

The company says many of its investors and clients have a wrong idea about the fund’s management and structuring.

 “However, the [money market unit trust] is not a bank account – it is a collective investment schemes product (also known as a “unit trust”). We have therefore decided to close the [fund] as of 6 July 2021 (the closure date), in the best interest of our clients, and given our findings that the majority of retail clients believe that their capital and returns are guaranteed,” the company said in a letter to investors.

Absa has given 90 days, from the date of publication of the document announcing the closure of the AMMF to customers to withdraw their funds and, if they wish, transfer them to another financial product of the Bank.

“Money market unit trust is not a bank account; it is a collective investment schemes product (also known as a “unit trust”) and therefore capital and returns are not guaranteed”

As a replacement, another fund called Absa Prudential Money Market Fund has been announced with the particularity of “an improved investment policy.”

An official document showed that the return generated by the AMMF has gradually declined from 7.56% in April 2019 to 3.85% in February 2021.

South Africans have invested almost US$5.9 billion in the unit trust, which has been around for 25 years.

The money market is where banks and other institutions lend and borrow money for short periods of time — anywhere from one night to a couple of months and money market funds invest in these short-term credit assets.

These unit trusts seek to give a better return than a one- to three-year fixed deposit bank accounts and are seen to be among the most conservative investments.

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